House prices returned to growth in December, says Halifax

Data from Halifax has supported the notion that strong UK house price growth returned in December after November's blip.

House prices in December were up 1.7% in a reversal of the previous month's 0.2% decline, as the bank's measure continued its recent erratic pattern.

House prices rose 9.5% in the three months to December compared to the same period the year before, with house prices in the last quarter also up 1.6% on the preceding three-month period.

Halifax said the quarterly rate of change remained below 2.0% for the second successive month, its lowest values during 2015, from a 1.8% quarter-on-quarter in the third quarter and a peak of 3.3% in the second.

This indicated a possible slight softening in the underlying rate of price growth, suggested Martin Ellis, the bank's housing economist.

“There remains, however, a substantial gap between demand and supply with the latest figures showing a further decline in the number of properties available for sale. This situation is unlikely to change significantly in the short-term, resulting in continuing upward pressure on prices.”

Other economists agreed that house prices were set to rise strongly in 2016.

Samuel Tombs at Pantheon Macroeconomics said the sharp rise in the Halifax measure was more evidence that the Bank of England’s existing macroprudential restraints are insufficient to prevent excessive house price growth.

"With wage growth set to strengthen in response to the decline in labour market slack, interest payments taking up only a small fraction of homeowners' income and supply shortages unlikely to be resolved quickly, we expect 2016 to see further strong price gains, increasing the pressure on the MPC to raise interest rates this year despite the slowing economy."

Howard Archer at IHS said, with Nationwide reporting house prices rose 0.8% in December after an increase of just 0.1% in November, it was advisable not to pin too much weight on one particular house price survey or measure or on one month’s figures.

"Taking an overview of the various surveys, we expect house prices to rise by around 6% over 2016 amid healthy buyer interest - supported by largely decent fundamentals - and a shortage of properties."